Monday, February 20, 2017

Finance Ministry revises budget downward to Rs 935.88 billion

The Finance Ministry has revised the budget downwards – based on the current dismal spending trend – to Rs 935.88 billion for the current fiscal year.
Though the earlier government had brought Rs 1048.92 billion budget for the current fiscal year, poor implementation capacity of the government agencies has forced the ministry to revise the budget downwards. But despite their eroding capacity to increase development spending, various ministries have sought an additional Rs 276.90 billion budgetary demand which is around 30 per cent of the total budget of the current fiscal year.
The ministry has also revised the capital expenditure target to 84 per cent or Rs 262 billion of the total allocated amount worth Rs 311.95 billion in the current fiscal citing the weak performance of the ministries that were responsible for mobilising a large chunk of the budget. Despite government's repeated harping on ramping up capital expenditure, the slow progress of big ticket projects under various ministries disappointed the government this year again forcing it to revise the budget downwards.
Addressing the Mid-Term Budgetary Review Programme in Kathmandu today, deputy prime minister and finance minister Krishna Bahadur Mahara said that various ministries have asked extra budget from the finance ministry.
Presenting a bleak picture of the government expenditure in development projects, Mahara said that the Ministry of Physical Infrastructure and Transport spent merely Rs 18.45 billion out of the total allocated amount of Rs 72.68 billion, Ministry of Urban Development was able to mobilise only Rs 8.56 billion out of the total allocation of Rs 19.05 billion, and National Reconstruction Authority (NRA) also mobilised just Rs 1 billion out of the total Rs 34 billion capital budget.
The government will be able to spend only 89.22 per cent of the total budget," he said, adding that the recurrent expenditure will also hover around only 91 per cent of the total allocation of Rs 617.16 billion.
"Instead of facilitating implementation of ongoing projects, the ministries have been asking for additional budget which is not a healthy practice,” he said, adding that the finance ministry, however, has been able to mobilise resources efficiently. “The ministry had set revenue target in the first half of 2016-17 at Rs 258.74 billion but succeeded in mobilising Rs 277.57 billion in the period, which 107.92 per cent of the target."
Mahara further said that the encouraging revenue mobilisation, which became possible due to various programmes lunched to plug revenue leakage holes, has forced the ministry to revise it annual revenue target to Rs 579.30 billion.
He also accepted that despite early budget – that was brought some 45 days ahead of the fiscal year – the budget implementation has not been satisfactory due to procedural hurdles. Mahara, however, reiterated to transfer the unspent budget to the projects that have been performing better and are in need of more resources.
“The budget of low-spending National Pride Projects will be transferred to other National Pride Projects that have performing better,” finance secretary Shanta Raj Subedi explained, adding that the transfer will be done according to the law.
Inefficient bureaucracy, procedural hurdles, lack of carrot and stick policy, and ad hoc budget preparation process are blamed for low capital spending that could have contributed to not only in employment generation but also in economic development in the long-run. “The government will transfer the budget to projects that can help capital formation and employment generation and give impetus to economic growth,” he added.
The ministry, however, claimed that the growth target of 6.5 per cent will be achieved due to growth in agricultural production and consumption sector. It also mentioned that inflation will remain below the desired level of 7.5 per cent as inflation in the review period stood at 5.8 per cent along with improved supply system and narrow inflation wedge between India and Nepal.
On the occasion, the National Planning Commission (NPC) vice chair Dr Min Bahadur Shrestha clearified that the ministries may not have to seek the permission of the NPC before implementing projects and programmes incorporated in the budget from the next fiscal year as the Finance Ministry is preparing to cut short the budget implementation process to expedite capital spending.
The Financial Procedures Rule currently makes it mandatory for ministries to get approval of the NPC prior to implementing central-level projects.
Because of this provision, the government failed to implement budgetary programmes from the first day of this fiscal year despite introducing the budget in Parliament one-and-a-half months prior to the commencement of the new financial year.
The Finance Ministry will soon put an end to this age-old practice by incorporating a provision in the Appropriation Bill that would pave the way for ministries to implement projects and programmes included in the budget without seeking permission of the NPC.
If such a provision is introduced, different ministries can roll out budgetary projects and programmes from the first day of the fiscal year, which is expected to help expedite the development budget.
Earlier, also then finance minister Dr Ram Sharan Mahat tried to cut short the practice.
But this time the ministry is mulling to amend the Financial Procedures Act and Rule, if there is need,” according to the chief of Budget and Programme Division at the Finance Ministry Madhu Kumar Marasini.
The Finance Ministry, from now onward, will also automatically approve projects and programmes sent using Line Ministry Budgetary Information System (LMBIS) to expedite capital spending. The LMBIS is a software that was introduced some 2 years ago to make budget planning process scientific and ensure funds are not allocated for various development projects in a haphazard manner.
It makes mandatory for ministries to clearly mention timeline for project implementation, time that would take to complete the project, challenges in implementation of the project, estimated cost of the project and expenditure plan over the years. But many ministries still submit programmes in a haphazard manner, ultimately delaying project implementation.